Erika Mangrum was thrilled with the new acupuncturist she'd hired to work at Iatria Spa and Health Center, her 62-person day spa in Raleigh, North Carolina. "He accepted, and we turned down all the other candidates," says the president of the $3 million company.
Mangrum, 38, looked forward to the employee's arrival. "Then," she recalls, "he opted out." After accepting the job, but before reporting for duty, the candidate informed Mangrum the job wasn't going to work out after all.
Mangrum had to go back to the other candidates she'd turned away and say she had an opening again. "That's a little embarrassing," she says. "Plus, you may have alienated them or lost the candidate to another job. It's more time and more energy."
As the economy and hiring pick up steam, entrepreneurs can expect more cases of new-hire fallout. "It happens in between 1 out of 20 and 1 out of 10 cases," says Elliot Clark, COO of Wayne, Pennsylvania, outsourcing firm Kenexa Corp. "And it's more common in high-demand areas."
Fallout rates vary by local job markets, industry and skill. Software developers with in-demand expertise, for example, may be courted by companies nationwide. No matter what the cause, fallout costs would-be employers in effort and outlays for advertising, candidate travel, search-firm or agency fees, and other expenses.
When fallout is caused by another employer's counteroffer, don't blame the candidate or the rival employer. Blame yourself for failing to make a market-aware offer and for failing to prepare the candidate for counteroffers.
Always study the employment market in advance to make sure you're competitive, says Nicholas Di Marco, professor of HR management at Webster University in St. Louis. "Know your competition, and know where you're strong and not [strong]," Di Marco says. If other employers are likely to offer a higher salary, emphasize the things money can't buy, such as a pleasant workplace, relaxed dress code or opportunities for advancement. "You may not be able to play up the money, but you may be able to play up the culture," Di Marco says.
If you suspect new hires will receive counteroffers, coach them on why and how to reject them. Point out that more money won't necessarily change factors that originally caused the candidate to seek a new position, such as lack of opportunity. "You want to sell them on the idea that a counteroffer is a negative that may come their way," says Clark. "Prepare the candidate for the counter-offer and get them ready to defeat it."
Also, take the high-touch approach. Don't lose contact between the time someone accepts your job offer and his or her first day on the job. Call for a chat and checkup a week or two before his or her start date, and again a few days before. Pay close attention to the new hire's demeanor. "You can tell, if they're nervous or uncomfortable, that something is wrong," says Clark.
Send personal, handwritten notes welcoming new employees. Information about your community and current news of company events and achievements help recent hires feel like part of the team. Keep it up even after employees report for work. A good orientation session, along with personal information about the people employees will work with, makes new hires feel like they belong, says Di Marco.
If worse comes to worst and a recent hire informs you that they've accepted a counteroffer, don't fret. Clark says that 85 percent of the time, a worker who takes a counteroffer leaves within a year. If you're still interested later on, you'll likely get another chance to snare the employee--and this time keep him or her onboard.
Mark Henricks writes on business and technology for leading publications and is author of Not Just a Living.